If you're carrying out a construction project abroad, you need to be aware of the potential pitfalls. Start by finding out which country's law applies
Fifty years ago, it was common for us Brits to think that we were at the centre of the world. The Times' newspaper headline from the 1920s – "Fog in Channel, Continent Cut Off" – summed it up. Now, of course, we are all committed Europhiles intent on chasing our share of business whether it is in the UK, Europe or the wider world. My personal workload clearly shows an international trend. Contracts based on Irish, Spanish, Maltese and Trinidadian law have passed over my desk in the past few weeks alone – and I thought that the major part of our workload was in the UK!

Unfortunately, people's interest in doing business abroad does not seem to have extended to a complete understanding of the obligations and liabilities that they may be taking on when they enter into contracts for work abroad or commence projects outside the UK.

Of course, it's obvious that there are differences in the law in countries around the world. Headline cases such as judicial executions in Middle Eastern countries (and that was not meant to be a pun, by the way), make those differences very clear.

And it doesn't stop at national level. You need look no further than the UK to see that we have different legal systems in England, Wales, Scotland and Northern Ireland. They may not differ as greatly as between sovereign nations, but they may be enough to catch you out.

The subject is clearly complex and this article is not intended as a "teach yourself international law". If you want to know about the law in another country, then go and buy a book on the subject – or better still, hire a lawyer who already knows the answer.

It is important, however, for the unwary to know that pitfalls exist out there, even at a very basic level. For instance, there is a widely held belief that if a project is being constructed in a certain country, then the law of that country will apply. This is incorrect. Applicable law is usually nothing to do with geography, unless the parties want it to be. It may be the case that English law applies to contracts for projects in England. If you wanted to have US law apply, then you could do so by stating it in the contract.

Contracts normally state the law that will apply to them. So English law could govern a construction project in Turkey if that is what the contract says. The contract may also define which courts will have jurisdiction – in other words, where any court action will take place. This could, for sake of argument, be Turkey. Just to add spice, there may be a different dispute resolution procedure. The parties could opt for resolution by arbitration in accordance with the procedural law of a neutral third country, and even add a set of procedural rules from yet another country on top of that.

Major international projects will probably employ contractors, subcontractors and consultants from different countries around the world. There is no particular reason why each subcontract, supply agreement, consultant appointment and so on, has to adopt the same approach. Indeed, at some point down the line, where it becomes remote from the parties to the main contract, it is inevitable that differences will come in. While there is nothing wrong with this per se, it does mean that the obligations running through the chain of contracts will not be back-to-back. For example, a contract under English law could entitle a sub-subcontractor to interest on a claim, whereas the subcontractor that has to pay this may be unable to claim interest from further up the line if its contract is under a law which does not allow interest.

Finally, watch out for a potential hitch with professional indemnity insurance cover. There are two things to check for here. First, look out for contracts under US law. You will probably find in the small print of your insurance policy some sort of limitation relating to this. At best, you may not have the same level of cover you would normally expect; at worst, you may have none.

Second, at policy renewal time, make sure that you tell your insurers where you are working in the world. If a project comes up somewhere else during the term of the policy, advise them. They will probably just note this fact, but failure to tell them could mean you have no cover at all.